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Local Authority Direct Provision of Housing

Posted on February 13, 2018

Local Authority Direct Provision of HousingToday the average house costs almost eight times average earnings – an all-time record. As a result it is difficult to get on the housing ladder, and the proportion of people living in the private rented sector has doubled since 2000 (2017 Housing White Paper).

Private sector housebuilders have only so much capacity and increasingly local authorities are starting to make their own direct provision of housing. This can take a variety of forms from more active management of housing delivery; to acting as a housing enabler; development partner and direct development.

The issue is that many local authorities are under-resourced in terms of land, finance and skills and require assistance to make a significant impact on housing delivery.

The Housing White Paper calls for many more houses to be built of the type people want to live in, in the places they want to live. To do so requires a comprehensive approach that tackles the issues at every point in the system.

The Elphicke-House report, ‘From statutory provider to Housing Delivery Enabler: Review into the local authority role in housing supply’ describes the strategic roles Councils could play in ensuring housing delivery through acting as a ‘Housing Delivery Enabler’. The Ephicke-House recommendations include:

Community Leadership and Strategic Clarity

Creating Housing Opportunity

Business Leadership

Management of Housing Supply

Shaping a Stronger Housing Finance Market

The RTPI has also published research into local authority direct provision of housing. This significant research report was commissioned specifically to identify the practical ways in which local authorities are engaging in the direct provision of housing. UCL (for the RTPI) carried out a comprehensive survey of local authorities and found that:

Local authorities are using a wider range of means to provide housing (e.g. building directly, providing land for housing, and providing loans to others).

44% of authorities reported that they have their own housing company.

There is therefore growing appetite and capacity in local authorities to return to or increase their roles in providing housing as a core function.

We outline below steps that local authorities can take if they would like to undertake a greater role in housing delivery.

Understanding the Pattern of Housing Delivery

Authorities who take on the role of Housing Delivery Enabler need to have a deep understanding of the new-build housing market in its area. This means ensuring there is comprehensive development monitoring data including:

Housing delivery in terms of the numbers, location, size, type and tenure; who is the lead developer, and any key partners; and sales values.

The significance of sites of different size and type (capacity for housing, greenfield/brownfield, within/on edge/outside settlement boundaries) etc.

The overall timescales entailed in housing delivery at each stage of the development process on a site by site basis - can a range of smaller sites can be delivered more quickly than one or two strategic sites?

What infrastructure has to be provided to enable sites in the pipeline to be brought forward? How significant has infrastructure delivery been to the timing of the site being developed? Has it caused delay?

Ideally, intelligence on land ownership, option agreements and subsequent transactions. Details on the organisation that has actually taken the development forward. The value of land for different uses e.g. agricultural, greenfield residential development land, brownfield commercial land). What is the true price of the land transacted? This is the ‘net’ price taking policy obligations and the cost of remediation into consideration. This information forms a vital baseline in ‘land value capture’ negotiations and funding of affordable housing and infrastructure.

This clearly has resource implications, but some of it could be out-sourced. For example, AspinallVerdi has a land value database service that it is promoting to local authorities nationally.

Active Management of the Housing Delivery Programme

This involves the Housing Delivery Enabler fully appreciating the different drivers from a public and private sector perspective.

From a private sector perspective landowners and developers have a commercial interest in maximising land value and profit.

From a public sector perspective, the Council has an interest in maximising housing delivery consistent with the number of homes as required in the Local Plan; and has different pressures on the delivery of infrastructure.

Ways to overcome some of these issues include:

Deployment of funds and project management capabilities for infrastructure to ensure that sites are ready for immediate delivery.

Focus on delivering infrastructure and opening up sites which are in the ownership of the public sector.

Actively work with the utility companies to deliver connections to essential services in a timely manner.

Work more closely with the LEP and the Homes England in order to secure funding for upfront infrastructure.

The Local Authority as Enabler

Local Authorities should ensure that all segments of the housebuilding sector contribute as fully as possible to housing delivery and utilise different forms of funding to support housebuilding. This boosts supply and helps meet the needs of particular types of households not catered for by the mainstream developers.

Practical actions include:

Ensuring enough land is allocated and that there are a range of small, medium and large sites in all locations across the District.

Ensuring that the planning system and statutory providers work in a way that does not constrain the start and timing of build out.

Registered Providers/Housing Associations – A reduction in grant rates has motivated many Registered Providers to engage in the mainstream for sale market. Councils can help the RP’s bid for and secure Homes England funding enhancing their capacity to deliver affordable housing.

Developers of Housing for Older Persons – The development of housing for older people, is likely to free up family housing, as older persons downsize. Authorities should acknowledge the key viability issues that this sector faces, including: (i) the high net-to-gross ratio which reduces the saleable area; (ii) the larger unit sizes which reduces the number of units that can be accommodated within a site; (iii) the higher build cost.

Other niche developers - Councils could engage a range of other developers active in the market who are not focussed on the large greenfield site model, e.g. regeneration and conversion specialists; small house builders; and the custom and self-build sector.

The Local Authority as Development Partner

Finally Councils could play a much more active role in enabling development if they are willing to intervene directly in the market, by acquiring land; and by providing funding for or making investments in housing developments.

Assembly of sites in multiple ownership in order to enable comprehensive development. This could include an element of land value capture.

Work with other public sector bodies to make use of public sector land which is no longer required for operational purposes.

Release of small infill plots - in Bassetlaw and Kingston-upon-Thames AspinallVerdi is working with the Council to review the feasibility of selling consented ‘surplus small sites’ to developers / custom-builders.

Use the Council’s public sector borrowing capacity to acquire land or to invest in residential development schemes. This enables greater control over the specification of development in terms of quality and tenure.

Acquisition of S106 affordable housing from private developers.

Project Experience

Our insight into the Local Authority direct provision of housing is informed by our extensive experience in this sector. For example:

AspinallVerdi is currently on the Homes England Multidisciplinary Panel and Economics Panel.

Housing Strategy / Case Making - AspinallVerdi has been working with Selby District Council to provide a ‘high-level’ review of the District’s affordable housing targets and provide initial strategic advice in respect of the delivery / implementation of the policy target.

Business Planning and Financial Appraisal – AspinallVerdi has acted for various projects sponsors and public sector agencies in respect of business plans; funding and due diligence.

Development Agreements / Land Value Capture etc – AspinallVerdi is appointed by Mid Sussex District Council to advise on the ‘land / cost equalisation agreement’ for the delivery of the Northern Arc (a strategic site located to the north of Burgess Hill for 3,500 new dwellings).

Custom Build – AspinallVerdi were appointed by PAS to research how Planning Authorities are responding to the government’s agenda for promoting the custom and self-build sector.

Franking Valuation – We are RICS Registered Valuers. Projects include the valuation of a scheme comprising 650 units on 55 acres.

Build to Rent – We carried out important research for Homes England and Stoke-on-Trent City Council into the viability and delivery model for a portfolio of private rented sector sites in Stoke. This is now being implemented with Gener8.

Policy development and review – we have acted for numerous Authorities nationally to complete Local Plan-wide viability and CIL viability appraisal studies to make recommendations on policy development.

Acknowledgement: The above is adapted from work by Wessex Economics for South Oxfordshire and the Vale of White Horse which AspinallVerdi peer reviewed for SODC.